Generics part of why U-M’s drug plan outperforms most others

Total drug costs for the U-M plan rose from $91.1 million in 2011 to $93.6 million in 2012, a growth rate of 3.5 percent. That’s a win over the 3.75 percent average reported by the Pharmacy Benefit Management Institute’s survey of plan sponsors, and a performance victory alongside the 6.5 percent projection of cost growth by the Segal Health Plan Cost Trend Survey.

U-M’s self-insured prescription drug plan has been beating the averages for the last 10 years, but how?

“Multiple strategies designed to work together have helped us,” said Keith Bruhnsen, prescription drug plan manager and assistant director in the Benefits Office. “U-M is in the unique position of being the employer and the plan administrator, and with access to some of the brightest clinical and policy minds in the country. With the support of our faculty-led pharmacy committees we implement the approaches that have the most influence over controlling cost and bolstering clinical effectiveness.”

More than $90 million of the $431 million that the university spent on medical care in 2012 went toward prescription drugs for the nearly 96,000 people covered.

“More than 956,000 prescriptions were filled last year by our plan members. With so many faculty, staff, families and retirees covered by the plan, even modest changes that we make to the plan as well as simple changes in behavior by plan members can all add up to a big overall savings that keep the plan affordable and the coverage high,” Bruhnsen said.

Strategies have included negotiating drug discounts, pill-splitting programs and participation in federal subsidy programs, but increasing the use of generic medications has been among the most important long-term efforts.

“Generic drugs are a safe and effective alternative to brand-name drugs, and they cost up to 90 percent less than their brand-name counterparts,” said Cheryl Kaltz, clinical pharmacist in the Benefits Office.

University employees and retirees increased their use of generic medications to just more than 83 percent of all prescriptions filled in 2012. That rate exceeds national benchmarks of about 80 percent.

“To put the numbers in perspective, every percent increase in our use of generics saves the university close to one million dollars,” Bruhnsen explained. This number has risen in recent years due to the increasing cost of certain brands, making the use of generics even more crucial to overall cost control.

Plan members save money because generic drugs have the lowest copay at $5 to encourage their use. Members who take the same medications regularly — like those for high cholesterol, high blood pressure, asthma and diabetes — can reduce their costs further by using mail order pharmacy services.

“They can have 90-day supplies mailed directly to their homes for the cost of only two copays, saving one-third of the cost for the same medication at a retail pharmacy,” Kaltz said.

Bruhnsen said the combined actions have helped the university keep copays lower for longer than many organizations, but it needs to be evaluated as costs change over time.

Driving the plan’s cost growth are drug price inflation, rising numbers of people covered by the plan, and new specialty drugs that can be extremely expensive but also provide valuable health benefits.

Bruhnsen said the continuing challenge is balancing the rising costs with the appropriate contributions from members to keep the plan’s coverage robust and effective for the long haul.